Correlation Between Caterpillar and Tenet Fintech

Can any of the company-specific risk be diversified away by investing in both Caterpillar and Tenet Fintech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Caterpillar and Tenet Fintech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and Tenet Fintech Group, you can compare the effects of market volatilities on Caterpillar and Tenet Fintech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Caterpillar with a short position of Tenet Fintech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Tenet Fintech.

Diversification Opportunities for Caterpillar and Tenet Fintech

0.16

Correlation Coefficient

Caterpillar  Tenet Fintech

Average diversification

The 3 months correlation between Caterpillar and Tenet is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Tenet Fintech Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenet Fintech Group and Caterpillar is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Caterpillar are associated (or correlated) with Tenet Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenet Fintech Group has no effect on the direction of Caterpillar i.e., Caterpillar and Tenet Fintech go up and down completely randomly.

Pair Corralation between Caterpillar and Tenet Fintech

Considering the 90-day investment horizon Caterpillar is expected to generate 0.16 times more return on investment than Tenet Fintech. However, Caterpillar is 6.16 times less risky than Tenet Fintech. It trades about 0.06 of its potential returns per unit of risk. Tenet Fintech Group is currently generating about 0.0 per unit of risk. If you would invest  23,039  in Caterpillar on September 21, 2024 and sell it today you would earn a total of  12,998  from holding Caterpillar or generate 56.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Caterpillar  vs.  Tenet Fintech Group

Caterpillar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tenet Fintech Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenet Fintech Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Tenet Fintech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Tenet Fintech

The main advantage of trading using opposite Caterpillar and Tenet Fintech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Tenet Fintech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tenet Fintech will offset losses from the drop in Tenet Fintech's long position.

The idea behind Caterpillar and Tenet Fintech Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.